Future funding for farmers across the Home Nations – part 2

Thursday, 22 November 2018

In the second article of this two-parter looking at the future of agricultural funding in the UK, we examine the factors which could affect how agricultural funding could be split between the Home Nations in the future.

The UK Government has confirmed that overall funding for agriculture will be protected in cash terms until 2022 (the scheduled end of the current Parliament). However, the manner in which agricultural funding will be spilt among England, Scotland, Wales and Northern Ireland after we leave the EU is now up for debate.

Fair funding?

Lord Bew will chair a review on how the money can be distributed among the Home Nations to deliver “fair funding for farmers”. The review, supported by an experienced panel of representatives from England, Scotland, Wales and Northern Ireland. The review is expected to take six months and conclude prior to the 2019 Spending Review.

How is CAP funding currently divided?

CAP funding across the EU is apportioned by taking into account area of land farmed, as well as the national geography and topography. In very general terms, land which has historically been more productive receives high support payments than lower-quality extensively-farmed land.

The EU introduced the Less Favoured Area (LFA) designation under CAP to reflect differences in physical and socio-economic features. It provides funding to help farmers in these areas operate viable businesses and gives an incentive to put this land to use. The proportion of agricultural land designated as LFA is the lowest for England compared with the other Home Nations.

Overall England receives the largest overall share of UK CAP funding, while Northern Ireland has the smallest share. However, England receives the lowest amount of CAP funding on a per capita basis compared with the other Home Nations. If we look at the amount of funding on a per hectare of farmland basis, then Scotland receives a lower amount compared to England, Wales and Northern Ireland.

Allocation of CAP funding in UK 2013-2017

England

Scotland

Wales

N. Ireland

Allocated UK CAP funding, million €

17,941

4,574

2,600

2,526

Share of UK CAP funding

65%

17%

9%

9%

CAP funding per capita*, €

328

851

838

1,365

CAP funding per hectare of utilised farmland~, €/ha

1,995

824

1,502

2,478

*Based on mid 2013 – mid 2017 population average ~Based on 2013 -2017 average of utilised agricultural land Source: Defra, ONS

What are the options going forward?

The majority of funds allocated to the devolved administrations by the UK Government are determined by the Barnett formula, which is mainly based on the devolved nation’s population as a proportion of the English population.

Michael Gove has stated that the “the Government won’t simply apply the Barnett formula to Defra’s funding beyond this Parliament”. As a result, the independent advisory board conducting the fair funding review will “consider each country’s individual circumstances including environmental, agricultural and socio-economic factors. Farm numbers and farm sizes will also be taken into account.”

In the absence of any detail as to how the funds may be split, anticipating the impact at farm business level within each Home Nation is unfeasible at this stage.

As a farmer, how the funding is split is out of your control. What is in your control is to maximise the potential of your business. Step back and look at your accounts; scrutinise if the money you are spending is giving you ample returns – if not, then why not and how can you change things? For more ideas, take a look at our guide “Preparing for change: The characteristics of top performing farms.”